Construction Insurance Bulletin

Many companies are implementing safety incentive programs, hoping that by rewarding employees for good safety records, they will cultivate a safer work environment and reduce costly Workers Compensation claims. Some employers are concerned, however, that safety incentive programs can actually lead to a more dangerous work environment where injuries are under-reported in pursuit of rewards. To make sure a safety incentive program is a positive addition to your company’s safety program, several factors should be considered.

1. Incentive Programs Are Just the Icing, Not the Cake – Most importantly, incentive programs should be just an added layer to your already strong and comprehensive safety program. Employees cannot improve their performance if they do not have the appropriate safety training needed to recognize and mitigate hazards. The bottom line is that safety incentive programs will not reduce injury rates and should not be implemented if you do not already have an effective safety program in place.

2. Support Safety from the Top Down – To demonstrate the importance of the program to employees, upper management should be committed and involved throughout the process. From the initial design and launch stages, to implementing the program, they must be visible on an ongoing basis. Management should communicate frequently to their employees about the program and take an active role in distributing the rewards.

3. Carefully Design and Administer Incentives – Poor design and administration are the most commonly cited reasons for incentive program failure. Because the concern of accident under-reporting is valid, some experts recommend substituting or adding a more process-based approach as opposed to a strictly results-based incentive program. A process-based system provides incentives for engaging in safety behaviors such as participating in safety training or earning a high mark on a safety quiz. Result-based approaches typically just provide rewards for accident-free time periods.

Once the overall approach is selected, the details of the program should be designed carefully with thoughtful consideration given to selecting the appropriate goals and rewards, establishing methods of evaluating and recording performance and determining how and when rewards will be given.

4. Give Meaningful Rewards for a Job Well Done – Common rewards include cash bonuses, time off work and gift certificates. Whatever you choose, make sure it has value to your workers and can be earned frequently enough to remain a top-of-mind goal.

Recognition can also be an effective part of an incentive program. For instance, rewards can be handed out at an awards banquet or along with a plaque.

5. Communicate Frequently and Effectively – Management should be proactive by emphasizing that hiding or not reporting injuries is strictly prohibited and that such acts will have consequences. Supervisors should clearly communicate how the program works and how employees’ progress will be measured. An ambiguous program is an ineffective one. To maintain incentive and keep the momentum, your employees should be continually reminded about the program and updated about how they are doing.

Remember, if your company’s safety incentive program is conducted thoughtfully and thoroughly, it will not only help reduce costly accidents and injuries, but also help boost the morale within your organization.

Virtually all buildings have at least one thing in common: Glass, and usually a lot of it. When a building owner is having work done, the windows are very susceptible to damage. Glass is fragile. Unless they are careful, workers can easily break, scratch, or mar windows, even if they are not working on them directly. For example, a contractor spray painting outdoors can find that he has painted the windows if the wind is blowing the wrong way. In situations like this, the contractor’s attempts to clean the paint off the windows sometimes make the problem worse. The cleaning chemicals he uses might damage the glass. Window cleaning services run an obvious risk of accidentally damaging windows, but carpenters, siding installers, masons, roofing contractors, and others can all conceivably face blame should the building owner find something wrong with the glass after the job is done.

When something like this happens, many contractors will look for their Liability insurance to pay for the cost of repairing or replacing the windows. However, they might find out that their policies do not cover accidents such as these. The standard Commercial General Liability policy does not apply to property damage to “(t)hat particular part of real property on which (the insured) or any contractors or subcontractors working directly or indirectly on (the insured’s) behalf are performing operations, if the ‘property damage’ arises out of those operations.” It also does not apply to damage to “that particular part” of property that must be restored, repaired, or replaced because the insured’s work was performed incorrectly on it unless the insured has completed his work.

The meaning of the phrase “that particular part” has been the subject of many insurance coverage disputes and some lawsuits over the years. If a contractor is painting the side of a building, is the entire side “that particular part” of the property on which he is working? If so, then the insurance company will consider any windows on that side to be the subject of the work; the company will not pay for damage to them. If a worker is cleaning the glass and does damage to the window frames, are the frames also “that particular part”? If so, the company will not cover this damage, either. How then do insurance companies and courts decide what was “that particular part” of a contractor’s work?

Here are some of the factors they consider:

How close is the damaged property to the specific part of the work? The closer the subject of the work is to the damaged windows, the more likely it is that coverage will not apply. A contractor installing gutters or replacing roof shingles is further removed from the glass than is a contractor painting the shutters or caulking around the windows. The worker painting or caulking may not have coverage, while the one working on the gutters or shingles might.

When did the damage happen? Did it happen at the time the contractor was doing the work or same time after?

What was the scope of the contractor’s control over the project? If the contractor was responsible for moving equipment or protecting the windows in order to do the job, it might follow that the windows were part of his work.

Because of the uncertainty of coverage in these situations, speak with our agents about purchasing Property insurance that might cover a scratched glass loss. It is possible that a Builders Risk or Installation Floater policy might fill in the gap. Claims for damaged windows can cost tens of thousands of dollars; contractors would be wise not to ignore the risk.

A real estate firm on the third floor of an office building hired a janitorial service to clean during a weekend. The service completed its work by late Saturday afternoon. However, one of its employees left water running in the employee break room after rinsing off some rags, which he also left in the sink. The rags plugged the sink drain. Over the next 36 hours, the sink overflowed, the room flooded, and water seeped into the law office downstairs. The water ruined several desktop computers, left marks on leather chairs, streaked the walls, and soaked a six-month-old carpet. The law firm submitted a bill for several thousand dollars in damages to the real estate firm. Because the real estate firm is legally liable for the actions of contractors it hires, it was liable for the damage to the law firm’s property.

This is the sort of accident for which companies buy Liability insurance. There are multiple ways to insure the exposure to loss from actions of contractors. Each company should investigate alternatives and choose those most appropriate for its situation.

Every business should carry its own General Liability insurance policy. The standard policy will cover damages caused by contractors. Although relying on its own insurance gives the business a certain amount of control (especially over timely payment of premiums,) there are disadvantages to using only this approach. Some policies might contain endorsements that reduce or eliminate this coverage, so business owners should review their policies carefully. Even if the policy does provide this coverage, a few large losses caused by contractors could use up the business’s insurance limits. Also, the insurance company will count the contractors’ losses when it calculates the business’s experience modification, resulting in higher future premiums.

The business might want to include an indemnification agreement (also known as a “hold harmless agreement”) in its contract for the work. This will require the contractor to assume liability for losses resulting from its work. If the contractor has insurance or other financial resources to pay for the loss, this is a good approach. The standard policy covers liability assumed under what it defines as an “insured contract.” However, some policies might carry endorsements that eliminate coverage for liability assumed under a contract. Also, if the business has to sue the contractor to enforce the agreement, the damaged third party will have to tolerate lengthy delays before it receives payment. Finally, unless the business meets very specific conditions, the contractor’s policy will not cover its defense costs.

Another approach is to require the contractor to name the business as an additional insured on its policy. This will provide the business with coverage for both the damages and defense costs. However, the business will share the contractor’s insurance limits with all the other additional insureds named on the policy; the amount of insurance available might be inadequate. The business’s insurance might or might not have to share in the loss, depending on the terms of both policies. Also, as with the hold harmless agreement approach, the business must hope that the contractor keeps its insurance in force.

Finally, the business could require the contractor to buy an Owners and Contractors Protective Liability policy. Issued in the name of the business (not the contractor,) this policy will give the business its own primary limits of insurance for the project, advance notice of cancellation, and keeps the losses out of the business’s loss experience. It does not provide coverage for completed operations; the business may still need additional insured coverage for that.

Every business hires contractors from time to time. Planning ahead can ensure that the business has adequate protection should an accident occur. Call our offices today to determine the appropriate Liability coverages for your particular situation.

Some of the most common lawsuits heard in courtrooms are discrimination suits against businesses. This is confirmed by the fact that in 2009 more than 130,000 complaints were filed with the Equal Employment Opportunity Commission alone. There is no officially estimated figure as to the total cost of discrimination lawsuits on businesses, but a reasonable estimate is around $2 billion per year.

Fortunately, there is an insurance product designed to protect businesses from these kinds of lawsuits: Employment Practices Liability insurance (EPLI). Insurance companies offer EPLI as part of their Business insurance product line. However, there is a disparity involved: A lot of eligible companies do not purchase EPLI. Despite the fact that the United States has become a litigious society, and despite the huge costs to businesses who do not have this kind of insurance, it seems odd that so many would resist protecting themselves from this incredible liability.

Regrettably, there are many myths about EPLI that have taken hold in the popular business consciousness. It is necessary to dispel these myths in order to drive home to businesses that they need to protect themselves from discrimination-related litigation.

1. Too many companies believe, whether due to the structure of their business or some other factor, that they are immune from lawsuits. This is flat out false. No matter what kind of company it is or how it is structured, even if it is set up as a corporation, legal protections can be stripped away instantly by a judge. Depending on the size of the business, it might not have the human resources practices and policies necessary to prevent a discrimination lawsuit. Therefore, if the business does not have that administrative structure in place, they are more exposed than they realize, and thus are a candidate for EPLI coverage.

2. Aside from believing that a business is immune from lawsuits, believing that they can absorb the costs of a lawsuit is the next most damning myth. Legal action is inevitably costly, and not just financially, either. Since in legal situations management staff and other professional members are asked to testify, gather evidence, and perform other actions for the court, the more time they spend on these non-core business activities, the less time they are focusing on the bottom line. Therefore, the more time it takes, the more lost revenue it costs that business. It is actually quite easy for a business to go bankrupt as the result of a lawsuit.

In addition to the non-calculable cost through lost earnings, an examination of the precise costs to businesses from discrimination lawsuits is very revealing. In two 2005 cases, Wachovia Corporation and Consolidated Freightways agreed to pay more than $5 million and $3 million to settle their respective lawsuits. In 2004, United Airlines was forced to pay more than $36 million to settle its own discrimination lawsuit case.

3. The final myth involves business owners failing to understand the full extent of their current coverage. Falsely, many think that general business insurance protects them against discrimination lawsuits, when in fact, it does not. Business Owner Policies, Workers Compensation, General and Professional Liability policies actually sometimes specifically exclude liability from discrimination suits.

Despite all possible non-insurance precautions that businesses take, EPLI is still the only way to protect themselves fully from the costs of lawsuits based on discrimination. EPLI provides coverage for liabilities such as sexual harassment, general discrimination, wrongful termination, breach of employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of career opportunity, wrongful infliction of emotional distress, and management of employee benefit plans.

Contractor’s Equipment insurance is an essential part of any construction firm’s insurance program. Commercial Property insurance covers a business’s personal property while it is at a location listed on the policy, but it does not cover property that moves among different locations. Business Automobile insurance does insure property that moves around, but it does not cover “mobile equipment” — property such as bulldozers, loaders, digging equipment, and power tools that the business uses off its own premises. Power tools might cost only a few hundred dollars, but large pieces like backhoes and excavators might be worth tens of thousands of dollars. To properly insure such property, the firm needs Contractor’s Equipment insurance.

A typical Contractor’s Equipment policy will cover the insured’s owned pieces of equipment listed on its declarations page or a separate schedule. It will also cover equipment that someone else owns and that is in the insured’s care, custody, or control. For example, the policy will cover a loader that the insured borrows from another contractor on a job site or that it rents from an equipment dealer. It might also provide one amount of insurance to cover a group of less expensive items, such as power hand tools. For example, it might provide $10,000 coverage on tools but no more than $500 for any one item. It will not cover automobiles, trucks, aircraft, watercraft, contraband, and it might not cover equipment the insured uses in underground mining operations, or equipment rented or loaned to others.

The policy will cover equipment for a variety of losses, including fire, explosion, vandalism, theft, collision with other equipment or objects, and overturning. Unlike standard property insurance policies, Contractor’s Equipment insurance often covers losses caused by floods and earthquakes. Insurance companies usually offer several coverage options, such as:

• Rental reimbursement coverage, which covers the cost of renting a temporary substitute when a covered cause of loss damages an insured item.
• Reimbursement of income the insured loses when it cannot complete a project because a covered cause of loss has damaged an insured item.
• Blanket coverage, which insures all covered equipment under one large amount of insurance instead of insuring each item under its own individual amount.

To purchase the proper amount of insurance, the firm must determine the values of each piece of equipment. A typical policy covers equipment for its “actual cash value,” which is the difference between the cost of replacing the equipment and the amount by which it has depreciated. Published equipment pricing guides, advertisements in trade magazines, and local equipment dealers are good sources of information on equipment values. In addition to the other options available, an insured must consider factors such as:

• Whether to pay extra to insure the equipment for its replacement cost without depreciation. This might depend on both the firm’s budget and the ease with which the firm can obtain used equipment should it need to.
• Whether the policy has a coinsurance clause, which penalizes the insured if coverage on the damaged item is less than its value at the time of the loss. Some companies might offer “agreed value” coverage, which eliminates the coinsurance clause and requires coverage up to some agreed amount.
• Whether to buy a higher deductible to decrease the premium.

Contractor’s Equipment insurance is not just for contractors; municipal governments and other organizations that uses this type of equipment need it as well. A consultation with one of our professional insurance agents will reveal your coverage needs and the appropriate insurance companies to meet them. Because the equipment is so expensive, the buying decision should be based on coverage and a company’s reputation, not just the premium.

Work on the new office complex was progressing on schedule. The owner had lined up tenants for two-thirds of the space and was in talks with several others. The general contractor expected to finish construction on time. All that changed when a fire broke out on the first floor late one afternoon. It spread from a stack of drywall awaiting installation to a pile of scrap plywood, where the wind picked up the flames and carried them to the structure. Drywall, insulation and plastic wiring all soon ignited. Firefighters were able to contain the blaze and limit the damage. However, it would now take an additional two months to complete the project because the contractors would have to clean up the debris from the fire and ensuing water damage, order replacement materials, and re-do much of the first floor’s construction. The owner faced the certainty of thousands of dollars in lost rents and additional interest on the construction loans.

The owner and general contractor had purchased a Builders Risk insurance policy to cover damage to the project. They would have coverage for the lost rents and interest expenses if the policy included special protection known as “Soft Costs Coverage.” Soft costs are costs or reduced income resulting from a delay in a project’s completion. They include expenses such as:

• Lost rents
• Additional interest on loans
• Additional real estate taxes
• Additional advertising costs
• Additional insurance premiums

Some Builders Risk policies have this coverage built in, while others provide it only if the insurance company adds it and charges an additional premium. The insurance covers the named insured for loss of income and additional expenses that result from direct physical loss of or damage to the covered property. There is no coverage unless the peril causing the loss is one that the policy covers for direct damage. For example, the policy will cover losses caused by fire but not losses caused by faulty workmanship. The lost revenue and extra expenses must accrue during the period starting a specified number of days after construction would have been complete if no loss had occurred and the date construction actually was complete. Some policies limit this period to no more than six or 12 months.

Soft costs coverage may provide one limit of insurance that applies to all covered losses, or it may have separate limits for different types of losses. For example, one company’s policy defines “soft costs” as loss of rental income, loss of gross earnings, additional interest and finance expenses, and additional expenses. The policy could have separate limits for each of these categories. A waiting period deductible applies, though some policies may apply a dollar deductible to losses that occur in a lump sum, such as legal fees. Some policies may also set a maximum amount that they will pay for any one month. They do not cover certain types of losses, such as those caused by strikes, breach of contract, design errors and omissions, lack of funds for repair or reconstruction, building laws and ordinances, and others.

The insurance company will determine the value of a loss by calculating the actual amount of income lost or extra expenses incurred during the delay period because of the delay. It will pay the amount of the loss or the amount of the insurance purchased, whichever is less.

Work with our professional insurance agents experienced in arranging your Builders Risk insurance. To make sure that the coverage terms and limits are appropriate, you should review the building contract, financing agreements, construction schedules, and other related documents. The type and amount of coverage will vary from one project to another, so it is important to give careful attention to each job’s particular circumstances.

It is very common for the insurance requirements in a construction contract to include a provision requiring the subcontractor to waive all rights against the owner and general contractor for recovery of damages to the extent these damages are covered by the sub’s workers’ compensation and general liability or commercial umbrella liability insurance. Owners and general contractors insist on this provision because they want to protect themselves from being held liable for injuries to a subcontractor’s employee. Typically, the contractor giving the waiver asks its insurance company to attach a “waiver of subrogation endorsement” to its workers’ compensation policy.

The endorsement states that the insurance will company will not enforce its right to recover payments it makes to an injured worker from the person or organization listed on the endorsement. It applies only to the extent that the employer insured by the policy performs work under a written contract requiring the employer to obtain the insurance company’s waiver. It does not directly or indirectly benefit anyone not listed on the endorsement. With this endorsement on the policy, the company cannot attempt to recover payments it made to an injured worker from the company listed on the endorsement, even if that company was responsible for the injury. Consequently, the loss impacts the employer’s experience modification, probably increasing future premiums. In addition, the endorsement carries an additional premium for the employer, normally some percentage of the premium attributable to the job.

The endorsement and the waiver agreement in the contract do not bind the injured employee. He still has the ability to sue the owner and general contractor for his injuries. However, it is also common for construction contracts to require the subcontractor to defend and indemnify the owner and general contractor from any such suits. Therefore, it is probable that the employer will have to pay an additional premium for the endorsement, pay higher future workers’ compensation premiums for the loss, and pay higher future liability insurance premiums because its policy will cover the other parties’ liability.

For example, assume the sub’s employee suffers serious injuries when tools and materials fall off a scaffold and strike him. He collects workers’ compensation benefits for his medical costs and lost wages. The sub’s workers’ compensation policy includes the waiver of subrogation endorsement, so the insurance company cannot recover any of its payments. The worker sues the owner and general contractor for his pain and suffering. However, the contract requires the sub to cover the owner’s and general’s liability, so the sub’s liability insurance pays for the pain and suffering lawsuit. The sub’s insurance pays twice for the same injury to the same worker.

Owners and general contractors require waivers of subrogation for several reasons. Insurance consultants, brokers, and risk managers usually encourage them to require waivers. Waivers protect their liability insurance and reserve it for other claims. Because a waiver reduces potential liability losses, they become more attractive to liability insurance companies and probably pay lower premiums. Also, subcontractors often do not resist these requirements because they feel they lack negotiating leverage and their insurance companies are usually willing to provide the endorsement.

A few states have curbed the use of waivers of subrogation in their workers’ compensation systems. At least four states have passed laws making the requirements unenforceable, and other states allow the employer to recover from the injured employee some of the proceeds of pain and suffering lawsuits.

In the majority of states that allow waivers, contractors should work with professional insurance agents experienced in providing construction insurance. They can suggest insurance companies that will offer the needed coverages at a reasonable cost and assist with contractual issues such as waivers of subrogation. Above all, contractors must read and understand their contracts so that their agreements do not become an ugly surprise after a loss.

According to statistics from the United States Department of Labor, 40% of industrial fatalities and 47% of individual injuries received on the job are due to intoxication from alcohol. This combined with the fact that businesses suffer related losses of five hundred million workdays and over eight billion dollars each year underscores the fact that alcoholic and drug-dependent employees are very dangerous for businesses. These unfortunate laborers drain the economy of much-needed growth and productivity.

Today, the troublesome situations created by employees suffering from addictions do not just apply to the usage of heavy machinery. Employees also have access to sensitive information about the company. This information when improperly handled leads to gaping liabilities that can exact a high toll on businesses.

The prevailing wisdom about alcoholic or drug-dependent employees is that they can be found in businesses of every size and more importantly every kind. Research actually reveals a different picture: employees with alcohol- or drug-related problems tend to seek out smaller businesses with no formal written policy prohibiting drug or alcohol consumption. This research would seem to explain a seeming disparity. The total population of illicit drug users is estimated to be just under fifteen million. Of those, 77% are employed. However, of heavy drinkers who are employed, just 17% work for companies that have employee rosters of five hundred or more.

Therefore, the best way to protect the workplace from alcoholic and drug-addicted employees is to instill a strict company policy against substance abuse combined with a drug- and alcohol-free program. Obviously each company must implement this program and policy in their own way due to their idiosyncratic circumstances, but there are five components that any program must have in order to succeed: drug and alcohol testing, employee education, employee assistance, the policy itself, and supervisor and manager training.

As each company takes the first steps towards setting up this program, the key element needs to be the formal written policy. In addition, the written policy should be displayed in as many areas as possible to remind employees of their responsibilities. Businesses must make it clear to their employees that the reasoning behind their adoption of this policy and program is for their employees’ benefit, in addition to preventing profit loss or liability resulting from employee injury. The written policy must include a description of prohibited behaviors and the consequences for engaging in those behaviors, set down in clear, understandable English.

Supervisor and manager training is necessary due to the influence and direct interaction supervisors have with their workforce. It is important to make a distinction between roles: supervisors are not meant to diagnose substance abuse problems, but their training should emphasize how to recognize poor employee performance and the possible symptoms of substance abuse, as well as where to refer employees for help. As for employee education, employees must be made aware of the personal and professional consequences of addiction as well as the specifics of the company’s policy and program efforts.

When starting a drug testing program, due to the multiple legalities involved, the Department of Labor recommends getting legal counseling before implementing a drug testing program. Finally, through the Working Partners for an Alcohol- and Drug-Free Workforce, the DOL has set up many resources in order to help American businesses achieve the goals of helping employees end their substance abuse. These resources may be found at www.dol.gov/workingpartners.

It’s no longer enough to choose an insurance company simply because they offer what appears to be the best coverage or lowest rates. You also have to know the financial security of the company especially in these challenging economic times when even the largest companies might be teetering on the edge of insolvency.

Additionally, you want to know something about the company’s track record when it comes to paying claims and overall customer satisfaction. Not all insurance companies are the same and you should take a hard look at your prospective insurer before handing over a big premium check.

How can you find this information? Well, it’s easier than you think because there are several major companies that rate insurance companies. Each offers a detailed rating service and most of these services are free. The rating system for each of these rating companies is based on a letter grade system such as “AAA”, through “NR.” However, you should note that there are both subtle and significant differences in the letter grade system. A “C” rating might mean an average score for one rating company but might also suggest the insurance company is experiencing significant financial challenges with a different insurance rating company. Make sure you fully understand the rating system for each of the companies before jumping to an erroneous conclusion.

Some rating companies only rate the top 200 insurers, while others offer more comprehensive data. Here is a brief summary of the major companies which rate insurance companies.

A.M. Best – www.ambest.com
This rating agency is the only one which specializes in banking and insurance companies, reinsurers and covers the total insurance market spectrum including international markets such as the U.K and Canada. Also offers a comprehensive article base and in depth commentary.

Fitch Inc. – www.fitchratings.com
Provides a global rating service on insurance products through combining both local and international expertise on contemporary insurance issues and trends. Also offers a monthly newsletter dealing with specific insurance issues called “Insurance Insights.”

Moody’s Investor Services – www.moodys.com
You have to register to log in with this company before you can access their info. Covers title insurers, life, mortgage and property and casualty. Mainly focused on the financial health and outlook of insurance companies and overall realm of the financial market.

Standard & Poor’s – www.standardpoors.com
Must be a subscriber. Offers international rating services on property and casualty, life, annuities, health, title, mortgage, bond and reinsurance. Rating services include link market solutions and both the derivative product and financial subsidiaries.

Two work crews building a new home are taking a break. One of the employees of the plumbing contractor and a carpenter get into a little verbal sparring. It starts out good-natured but turns heated, and the plumber picks up a metal nut and flips it in the other man’s direction. At that moment, the carpenter stands up directly in the nut’s path. It strikes him in the eye; the ensuing injury is so severe that he loses part of the sight in that eye. He sues the plumbing contractor and the employee who threw the object. Employer and employee both look for coverage and defense under the plumber’s Commercial General Liability (CGL) insurance policy. Although the policy will likely cover the employer, coverage for the employee is not certain.

A CGL policy normally does not cover a person (an “insured”) for liability for injuries or damages “expected or intended from the standpoint of the insured.” If the insurance company concludes that the plumber’s employee either expected or intended to injure the carpenter with the thrown nut, it will not cover either his liability or defense costs. As R. Steven Rawls and Rebecca C. Appelbaum explained in a recent article, when courts have interpreted this policy language, they tend to agree on the meaning of the word “intended” but differ on the meaning of “expected.” Courts in various states have approached the meaning of “expected” in different ways.

• Expected and intended mean the same thing. Some courts have ruled that the two words have the same meaning within the insurance policy’s context. If the plumber expected the carpenter to get hurt, he must have intended it, and vice versa.
• What did the insured think was more likely to occur? A Texas court ruled that a result, such as an injury, is expected if the insured considered its occurrence to be more likely to happen than not to happen. The same court said that a finding that the insured intended an injury requires more proof than does a finding that an injury was expected.
• If the insured committed a reckless act, does that automatically mean he expected an injury? Another Texas court did not believe so. It raised the possibility that someone, while aware of the risks of a particular action, might believe that the chances of something going wrong are low. An Indiana court also said that recklessness alone is not enough to prove that an insured expected an injury. However, an Illinois court said that some actions are so inherently dangerous (such as firing a gun) that the only possible conclusion is that the insured expected the injury.
• Two-part tests. Some courts have used a two-part test to determine expectation. A Michigan court used a test that asked, first, did the insured foresee the injury that occurred? If not, was the likelihood of the injury so overwhelming and obvious as to make unbelievable the insured’s claim that he didn’t foresee it? A Delaware court said that, where the insured clearly did not intend to injure the other person and where he should not necessarily have known that an injury would occur, the policy would cover him.

Construction sites are dangerous places; injuries can occur either through horseplay or in the normal course of work. Contractors cannot emphasize too strongly to their employees the necessity of common sense and care on the job site. If an employee injures someone else on the site, his financial well-being could depend on a court deciding whether he should have expected the injury. That’s a chance no one should want to take.